Asked by ed thelson Lacombe on Jun 20, 2024
Verified
A corporation reported cash of $27,000,total assets of $461,000,and total equity of $157,895 on its balance sheet.Its common-size percent for cash equals:
A) 17.1%.
B) 58.6%.
C) 100%.
D) 5.86%.
E) 1707%.
Common-size Percent
A financial analysis tool that expresses each item in a financial statement as a percentage of a base amount, facilitating comparison across different periods or companies.
Total Assets
The sum of all resources owned by a company, valued in monetary terms, which include buildings, equipment, inventory, and cash.
Cash
A form of liquid asset that includes currency and other assets that are readily convertible to known amounts of cash and can be used to settle debts, purchases, or other transactions.
- Compute and evaluate liquidity metrics, including the acid-test ratio, current ratio, and accounts receivable turnover, to determine financial well-being.
Verified Answer
Common-size percent for cash = (Cash / Total assets) x 100
= ($27,000 / $461,000) x 100
= 0.0586 x 100
= 5.86%
Therefore, the correct answer is D) 5.86%.
Learning Objectives
- Compute and evaluate liquidity metrics, including the acid-test ratio, current ratio, and accounts receivable turnover, to determine financial well-being.
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